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Tenet Healthcare (THC) Up 55% in a Year: Is More Upside Left?

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Shares of Tenet Healthcare Corporation (THC - Free Report) have rallied 54.7% in a year, outperforming the industry’s increase of 26.1% and the Medical sector’s decline of 20.1%. The S&P 500 composite index has risen 6.1% in the said time frame. With a market capitalization of $9.2 billion, the average volume of shares traded in the last three months was 1.2 million.

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Strong revenues stemming from solid segmental performance, diversified care network, strategic buyouts and partnerships to harness market opportunities coupled with sound financial position continue to drive Tenet Healthcare.

This diversified healthcare services company, carrying Zacks Rank #3 (Hold), has a solid track record of beating estimates in each of the trailing seven quarters.

Can THC Retain the Momentum?

The Zacks Consensus Estimate for 2022 earnings has moved north 7.4%, while that for 2023 has moved up 8% in the past 60 days, reflecting analysts’ optimism.

Revenues of Tenet Healthcare continue to benefit from the recovery in adjusted admissions and outpatient admissions, which suffered a downfall in 2020. Solid contributions by Hospital, Ambulatory and Conifer segments should help sustain the growth momentum. Management anticipates net operating revenues between $19.5 billion and $19.9 billion for 2022, the mid-point of which indicates an increase of 1.1% from the 2021 reported figure.

Tenet Healthcare resorts to numerous acquisitions and partnerships for bolstering its capabilities, growing care network and expanding geographical presence. As of Dec 31, 2021, THC’s care network encompassed 60 hospitals and 535 other healthcare facilities. More than 20 ambulatory surgery centers remained in development at the end of 2021.

Tenet Healthcare boasts a solid financial standing backed by strong cash balance and adequate cash-generating abilities. The healthcare provider generated cash from operations worth $1.6 billion in 2021. Riding on a sound liquidity position, THC makes constant efforts to repay debts, which in turn, will bring down the mounting interest burden.

Tenet Healthcare’s leverage ratio has been improving for a while. This uptrend is further substantiated by THC’s total debt to total capital of 88.4% at the fourth-quarter end, which not only improved 600 basis points from the level achieved at 2020 end but also remained below the industry’s figure of 91.9%.

Tenet Healthcare has a favorable VGM Score of B. VGM Score helps identify stocks with the most attractive value, the best growth and the most promising momentum.

Stocks to Consider

Some better-ranked stocks in the medical space are Mednax, Inc. (MD - Free Report) , The Ensign Group, Inc. (ENSG - Free Report) and Adaptimmune Therapeutics plc (ADAP - Free Report) . While Mednax sports a Zacks Rank #1 (Strong Buy), Ensign Group and Adaptimmune Therapeutics carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Mednax’s earnings surpassed estimates in each of the last four quarters, the average surprise being 27.99%. The Zacks Consensus Estimate for MD’s 2022 earnings suggests an improvement of 12.9% from the year-ago reported figure, while the same for revenues suggests growth of 4.2%. The consensus mark for Mednax’s 2022 earnings has moved north by 7% in the past 30 days.

The bottom line of Ensign Group outpaced earnings estimates in each of the last four quarters, the average surprise being 1.72%. The Zacks Consensus Estimate for ENSG’s 2022 earnings suggests an improvement of 11.8% from the year-ago reported figure, while the same for revenues suggests growth of 12.1%. The consensus mark for  2022 earnings has moved north by 3% in the past 30 days. Ensign Group has a VGM Score of A.

Adaptimmune Therapeutics delivered a trailing four-quarter  earnings surprise of 0.91%, on average. The Zacks Consensus Estimate for ADAP’s 2022 earnings indicates a rise of 25.6% year over year. The consensus mark has moved north by 3% in the past 60 days. Adaptimmune Therapeutics has a has a Momentum Score of B.

Shares of Mednax, Ensign Group and Adaptimmune Therapeutics have lost 16.7%, 7.7% and 66%, respectively, in a year.